18% GST on FSI charges to spike home prices by 10%, CREDAI writes to FM Sitharaman
In a letter to Finance Minister Nirmala Sitharaman, CREDAI said that imposing GST on FSI charges, either retrospectively or prospectively, would also affect not just housing demand but also supply as it would raise significant economic and viability concerns.
CHENNAI: Warning that the decision of imposing 18% GST on floor space index (FSI) charges will increase the housing prices by 10% cent, CREDAI (Confederation of Real Estate Developers’ Associations of India) has urged the Union Finance Minister to reconsider the decision.
In a letter to Finance Minister Nirmala Sitharaman, CREDAI said that imposing GST on FSI charges, either retrospectively or prospectively, would also affect not just housing demand but also supply as it would raise significant economic and viability concerns.
CREDAI further claims that retrospective clarification of GST on such payments would burden real estate developers with an enormous amount of unforeseen liabilities, disrupting the financial and cost planning of on-going and completed projects. The resulting financial pressures could potentially lead to stalled developments and jeopardise the security of home buyers invested in those projects.
“Even prospective applications would substantially elevate construction costs, imposing additional financial burdens on consumers and deteriorating housing affordability issues, hindering the collective mission towards ‘Housing for All’,” the letter said.
Additionally, developers are also excluded from claiming ITC (Input Tax Credit) on GST and this move will further accrue costs and lead to double taxation, increasing prices as a direct consequence. “To avoid any adverse impact on housing demand, supply, and the ripple effect on the Indian economy, CREDAI urges the Union government to maintain the ongoing status quo and keep FSI charges outside the scope of taxability,” the letter added.
Boman Irani, president, CREDAI, said: “FSI/additional FSI charges constitute a significant part of the project cost. The proposal to impose 18% GST on such charges could prove to be counterproductive and act as a deterrent to housing supply and demand, owing to additional financial obligations and increasing housing prices as a direct consequence. We strongly request and recommend to the government to keep the FSI charges exempt from GST.”
